Government bonds also sold off, driving yields higher. The 10-year U.S. Treasury yield rose as high as nearly 4.6%, its highest level since May.
Airline stocks were some of the hardest hit shares Wednesday. United Airlines tumbled more than 4%, Delta Air Lines slid 3%, and Southwest Airlines fell 2.5%. Other travel stocks, such as Booking Holdings and Carnival, fell 5%.
With oil prices rising again and inflation fears returning to the forefront, other companies that rely on discretionary consumer spending also tumbled. DoorDash fell 6%, Home Depot and American Express fell 3% while Nike, Proctor & Gamble and McDonald’s dropped 2%.
Global stocks also sold off, with Spain’s flagship index falling more than 2%. Benchmark indexes in Germany, France, Italy and the U.K. were all down by around 1.5%.
On Tuesday, the U.S. said that Iran struck three commercial vessels near the Strait of Hormuz. Tehran has not claimed responsibility for the attacks.
Later in the day, the U.S. Treasury revoked a sanctions waiver that allowed Iranian oil to be sold into the global market and U.S. Central Command launched “a series of powerful strikes against Iran” in retaliation for the vessel attacks.
“Renewed tensions in the Middle East have interrupted what had become an increasingly complacent market narrative, prompting investors to reassess geopolitical risks after several weeks of pricing in a smooth path toward de-escalation,” said Capital.com market analyst Daniela Hathorn in a Wednesday morning note.
“The latest attacks have lifted oil prices, weighed on equity markets and reminded investors that while a ceasefire remains in place, a lasting agreement between the US and Iran is far from guaranteed,” she added.
After the U.S. and Iran signed a memorandum of understanding in mid-June, U.S. oil prices stabilized around $69-$70 per barrel and remained there for the better part of three weeks.
“For markets and the global economy, the prospect of a swift return to pre-conflict energy and goods flows through the waterway is fading,” said Geoff Yu, senior market strategist at BNY.
